EPC Contractors: What is to be Understood?

A practice that is commonly followed within the construction industry is EPC. It tends to stand for “Engineering, Procurement & Construction”. When operator of a project hires the EPC Contractors for performing an entire operation, this kind of contract is said to come into existence. The contractor, however, needs to concur to the time period and the standards, while the project owner requires explaining all the necessary requirements and needs for the undertaking. Taking charge of the entire project as specified by the owner, the contract, who as a matter of fact, is employed by the owner, does assume immense risk and liability under the EPC contract.

What does the contract provide?

In the EPC contract, contract agrees in providing the commissioned project for a pre-determined amount to the proprietor. This is expected to make it up for the contractor to have complete control all the factors of the project. Moreover, he is also anticipated to report to the owner as and when required. This is due to the fact, that there is only a single contact point for the owner and which is the contractor. In short, the EPC contract does assist in making the administration and management to look quite simple for the proprietor. Taking into account, the expense is being decided at the beginning of the contract, it certainly is not impacted by the fluctuations that take place in the marketplace. It is considered to be another favorable factor for the operator. Irrespective of the fact as to how the project moves on, it permits the owner to precisely know how much he is to commit in this regard.

Responsibility of the owner

Undoubtedly, it is the owner, who is quite responsible for outlining the different key factors present in the EPC contract. One such element about the undertaking, which the proprietor needs to outline within the given agreement, would be the specifications and scope of building undertaking. Also, the owner would additionally need to clarify the prevailing standards of the different kinds of materials, including the overall construction of the undertaking. Irrespective of the time, the EPC contract is arranged, the project’s time table, including the expense needs to be summarized by the proprietor.

Things to understand

• To guarantee profit, the contractor in the EPC contract needs to control the project quite well.
• The project cost average would drop on the contractor, since the undertaking expenses have been pre-determined. 
• Cash flows directly from the revenue of the contractor, in case, he is not able to get the undertaking to be completed below or at the specified budget. 
• For making sure that the project is on time, he needs to understand the local marketplace, in regards to labor, availability and materials. 
• He also requires being aware of the local laws and codes along with specifications that are present for each phase of this undertaking. 
• Since, it is required to employ various sub contractors, it is necessary to known about the local supplies and the expenses of engineering and personnel providers. 
• Another aspect to be understood is the local and global personnel expenses and supplies. 

It can be said that the contractor makes things easy for the proprietor and helps him to get rid of all the strains of taking effective decisions on a day to day basis that could be a real daunting task.

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